Robinhood users have been making headlines as of late. With many novice traders now using the platform, they often follow the herd and invest in popular companies.
Aug. 19, 2020
There is no telling what the next big hit among Robinhood users may be, but General Electric (NYSE: GE), Disney (NYSE: DIS), and GoPro (NASDAQ: GPRO) are three stocks that these investors love right now.
1. General Electric
Robinhood investors became interested in General Electric due to its household name and low entry point price. GE saw its share price plummet as soon as the pandemic kicked in. It traded at less than half of its pre-pandemic price at one point and has not really recovered too much since then. There was an 11% drop in July following poor Q2 earnings.
While the $2.1 billion cash burn was less than the anticipated $3.5 billion to $4.5 billion, the overall results weren’t too enticing and a lot of investors began to sell. All of the company’s divisions were down in terms of revenue, profits and orders, with healthcare being the only profitable segment. This was due to demand for the likes of ventilators and other products linked to COVID-19 treatments.
Its cash-generating aviation sector was hit hard by the pandemic, with orders dropping by 56% year-on-year and its profit margin going negative. CEO Larry Culp still believes that the company can become cash flow positive in 2021, but returning to profitability looks to be a long way off.
Total debt has been reduced by $22 billion since the beginning of 2019 and there are green shoots starting to appear in the aviation sector. It has also invested heavily in renewable energy via its Haliade-X offshore wind turbine to launch in 2021.
While things may turn around at some point in the future, profitability is a long way off and sluggish recovery is expected post-pandemic.
Disney has been around for almost 100 years and it isn’t going away. One of its recent success stories was the launch of its Disney+ streaming service in November 2019. It has more than 60 million subscribers to date, with Hulu subscriptions rising 27% over the past year and ESPN+ subscriptions doubling.
The company is still dealing with the effect of the pandemic on its Parks, Products, Experiences, and Studio Entertainment segment. This led to the most recent quarter’s revenue falling 42%, with net income down 72%.
New CEO Bob Chapek hasn’t been in place for six months but he has already made significant moves to streamline the business. This includes getting rid of 20+ foreign television channels, cutting a Broadway ‘Frozen’ show, and significantly scaling down a $1 billion resort technology project. His focus is on transforming Disney into more of a digital juggernaut to reach a wider audience and the pandemic has certainly sped up this transition.
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Disney’s share price is down 14% year to date and with a post-pandemic recovery, investors could be nicely positioned if they get involved now. While its streaming business does not yet come close to other key segments for the company, it certainly is a shining light in an otherwise dark year. As it continues to expand its streaming offering, investor confidence is only going to grow and grow.
GoPro has been popular among Robinhood investors when they initially sign up to the platform, as they can get a free share in a company. This is very often GoPro due to its relatively low price point and the familiar name.
GoPro saw second-quarter revenue drop 54% year-on-year, mainly as a result of retail channels selling fewer cameras due to the pandemic. This saw the net loss grow to $51 million in Q2 compared to an $11 million net loss the previous year. The company has not been profitable since 2015 and this doesn’t look like changing any time soon.
It managed to sell more cameras than anticipated with 750,000 units sold in Q2 compared to the estimate of 600,000 – 650,000. Management believes that it will have 600,000 to 700,000 paying Plus subscribers by year-end, compared to 373,000 in Q2.
The company’s share price did plummet by about 50% in March but it has seen a strong recovery since then, rising from around the $2 mark back up towards the $5 range. While the company looks set to continue selling plenty of cameras and improving its subscription service, its profit potential and price do not appear to be enticing enough for an investment any time soon.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.